Critical Reasoning is more than just one of the three verbal sections on the GMAT. It’s a way of thinking that applies to every GMAT subject area. In fact, it’s more still. It’s a skill that has wide application outside the GMAT.
The classic example of a lack of critical reasoning is the groupthink that led to the mortgage crisis, which eventually caused the global financial crisis. Very few people questioned the assumption that house prices would continue to rise. As long as prices rose, homeowners would be able to refinance their mortgages when, for example, low introductory interest rates increased or when balloon payments came due. And the system would keep chugging along. But it didn’t…
And after it didn’t, I was fortunate to join a team that took an investigative look at mortgages, specifically subprime mortgages, to ask the important questions, and, more essentially, to think critically about their answers. What is a reasonable expectation for defaults? How does this expectation vary by region? What about the projected trajectory of interest rates? House prices are decreasing more in some regions than others. What does that mean for our analysis?
But let’s back-up a step. What did most industry professionals miss in the first place? Let’s apply Veritas Prep’s critical reasoning strategy, specifically the strategy for question stems requiring a strengthening or weakening premise from the answer choices to be added to the argument in the stimulus, to see. Doing this well requires identification of the gap between the premise and the conclusion in the stimulus, thinking critically to determine where that logical gap may reside.
Let’s employ this strategy to deconstruct the general thinking in the years leading up to the mortgage crisis:
Premise: Historically, housing prices have increased.
Conclusion: Therefore, homeowners will be able to refinance their mortgages.
Gap: Just because something has been true in the past does not mean it will continue to be true. Housing prices may not continue to rise!
To be fair, some people did think critically and sound the alarm bells. They have written some really interesting books that offer intelligent perspectives on their reasoning and are well worth your study break time.
Let’s learn a lesson from them and from Veritas Prep’s critical reasoning strategy. Critical reasoning is a skill that you can hone during your studies to master the Critical Reasoning section on the test, the critical thinking that leads to success on all GMAT question types, and the logic that should underpin conclusions throughout your career.
Casey Frandrup is a Veritas Prep GMAT instructor based in Portsmouth, RI. After graduating from Duke with a degree in Economics and receiving her MBA from UC San Diego, Casey went on to teach Macroeconomics in Bahrain to personnel affiliated with the U.S. Naval base. Now she is state-side coaching students towards success on the GMAT.